Debt talks grind on, clock ticks toward default

By Andrew Taylor

Associated Press

Published: Wednesday, July 13 2011 5:05 a.m. MDT

Senate Majority Leader Harry Reid of Nev. speaks during a news confernece on Capitol Hill in Washington, Tuesday, July 12, 2011.

Susan Walsh, Associated Press

WASHINGTON — Budget talks between President Barack Obama and his GOP rivals are at a frustrating standstill, leading a top Republican to launch a long-shot proposal to give Obama sweeping new powers to muscle through an increase in the government's debt limit without the approval of a bitterly divided Congress.

Lawmakers return to the White House for another negotiating session Wednesday. A two-hour session Tuesday produced no progress after a day of poisonous exchanges between Democrats and Republicans.

Saying he didn't see a path to an agreement so long as Democrats insist on revenue increases, Senate GOP leader Mitch McConnell of Kentucky offered a backup plan that would, in effect, guarantee Obama requests for new government borrowing authority unless Congress musters veto-proof majorities to deny him.

McConnell's plan immediately ran into stiff opposition among tea party conservatives and seemed unlikely to pass the House, but neither the White House nor House Speaker John Boehner, R-Ohio, dismissed it out of hand.

"I think everybody agrees there needs to be a backup plan if we can't come to an agreement," Boehner said in a Fox News Channel interview Tuesday afternoon. "And frankly, I think Mitch has done good work."

Under McConnell's proposal, Obama could request — and likely secure — increases of up to $2.5 trillion in the government's borrowing authority in three separate installments over the coming year as long as he simultaneously proposed spending cuts of greater size.

The debt limit increases would take effect unless blocked by Congress under special rules that would require speedy action — and even then Obama could exercise his authority to veto such legislation. But the president's spending would have no guarantee of receiving a vote.

"The American people elected (McConnell) to serve as a check on Obama's appetite for out-of-control spending, not to write him a blank check to continue the binge," said conservative activist Brett Bozell. "It's these sort of shenanigans that got Republicans thrown out of power in 2006."

McConnell made his proposal public a few hours before Obama presided over his third meeting in as many days with congressional leaders searching for a way to avoid a default and possible financial crisis.

Democratic officials who participated in the session said Obama did not reject McConnell's idea, but said it's not his preferred approach. A statement issued later by press secretary Jay Carney said the president "continues to believe that our focus must remain on seizing this unique opportunity to come to agreement on significant, balanced deficit reduction."

McConnell's plan was hatched out of frustration that Congress and Obama are deadlocked as the clock ticks toward an Aug. 2 deadline for a market-rattling default on U.S. obligations.

"I had hoped all year long that the opportunity presented by his request of us to raise the debt ceiling would generate a bipartisan agreement that would begin to get our house in order," McConnell said. "I still hope it will. But we're certainly not going to send a signal to the markets and the American people that default is an option."

Republicans are demanding $2 trillion-plus in budget cuts as the price for a commensurate increase in the government's ability to continue to borrow more than 40 cents of every dollar it spends. Both Republicans and Obama see the politically toxic debt limit vote as a way to seize an opportunity to cut future deficits — a move that would seem to be to the political benefit of both sides.

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